8/14/2019 EFF: 20020710 taxes-com court opinion http://slidepdf.com/reader/full/eff-20020710-taxes-com-court-opinion 1/23 U n i t e d S t a t e s D i s t r i c t C o u r t F o r t h e N o r t h e r n D i s t r i c t o f C a l i f o r n i a 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA J.K. HARRIS & COMPANY, LLC, a South Carolina limited liability company, Plaintiff, v. STEVEN H. KASSEL, an individual; and FIRSE TAX, INC., a California Corporation, d/b/a TAXES.COM, Defendants. / No. 02-0400 CW ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S APPLICATION FOR A PRELIMINARY INJUNCTION Plaintiff J.K. Harris & Company, LLC moves for a preliminary injunction enjoining Defendants from 1) using the trade name “J.K. Harris” on Defendants’ “taxes.com” website; 2) publishing defamatory, untrue or misleading information about Plaintiff; 3) using HTML code and computer programming techniques to divert Internet users looking for Plaintiff’s website to Defendants’ website; and 4) using any editorial position at Internet directories to promote Defendants’ business and interfere with Plaintiff’s business. The Court issued a temporary restraining order on February
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services, or any container for goods, uses in commerceany word, term, name, symbol or device, or anycombination thereof, of any false designation oforigin, false or misleading description of fact, orfalse or misleading representation of fact, which (A)is likely to cause confusion or to cause mistake or to
deceive as to the affiliation, connection orassociation of such person with another person, or asto the origin, sponsorship, or approval of his or hergoods, services, or commercial activities by anotherperson . . . shall be liable in a civil action by anyperson who believes that he or she is or is likely tobe damaged by such act.
15 U.S.C. § 1125.
1. Initial Interest Confusion
The Ninth Circuit has held that “initial interest
confusion” is actionable under section 43 of the Lanham Act.
Initial interest confusion “occurs when a consumer is lured to a
product by its similarity to a known mark, even though the
consumer realizes the true identity and origin of the product
before consummating a purchase.” Eli Lilly & Co. v. Natural
Answers, Inc., 233 F.3d 456, 464 (7th Cir. 2000); see also
Brookfield Communications, Inc. v. West Coast Entm’t Corp., 174
F.3d 1036, 1062 (9th Cir. 1999).
In Brookfield Communications, the court held that the
plaintiff Brookfield was the senior user of the trademark
“MovieBuff.” The court enjoined the defendant West Coast from
using the URL “moviebuff.com” because such use was likely to
cause confusion among consumers as to the source of the
defendant’s services. 174 F.3d at 1053-1061 (applying eight
factor test enunciated in AMF Inc. v. Sleekcraft, 599 F.2d 341
(9th Cir. 1979)).
The court also enjoined the defendant from using the
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1The Brookfield Communications court used the term“metatags” to refer to “HTML code not visible to Web users butused by search engines in determining which sites correspond tothe keywords entered by a Web user.” 174 F.3d at 1061-1062n.23.
2Defendants’ argument that initial interest confusion isonly actionable when combined with a separate trademarkinfringement claim is unpersuasive. The above-quoted rationalefrom Brookfield makes clear that initial interest confusion is adistinct harm, separately actionable under the Lanham Act.
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plaintiff’s trademarked term in its HTML code. Although HTML
code is not visible to consumers and, therefore, is not likely
to cause consumer confusion, the use of trademarked terms in a
website’s hidden code “will still result in what is known as
Web surfers looking for Brookfield's "MovieBuff"products who are taken by a search engine to"westcoastvideo.com" will find a database similarenough to "MovieBuff" such that a sizeable number ofconsumers who were originally looking for Brookfield'sproduct will simply decide to utilize West Coast'sofferings instead. Although there is no sourceconfusion in the sense that consumers know they arepatronizing West Coast rather than Brookfield, there inevertheless initial interest confusion in the sensethat, by using "moviebuff.com" or "MovieBuff" to diverpeople looking for "MovieBuff" to its web site, WestCoast improperly benefits from the goodwill thatBrookfield developed in its mark.
Id.2
Plaintiff here alleges that Defendants have constructed the
taxes.com website so that web surfers searching for Plaintiff’s
website will be referred to Defendants’ website as well.
Plaintiff alleges that Defendants have accomplished this purpose
by applying a “strategic combination of computer programming
techniques,” including excessive uses of Plaintiff’s trade name,
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3Nominative use occurs when “the only word reasonablyavailable to describe a particular thing is pressed intoservice.” New Kids on the Block, 971 F.2d at 308.
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divert Plaintiff’s potential consumers to its website.
Defendants contend that their intent is not to confuse
customers, but to warn them about business practices which
Defendants contend are harmful to consumers. Defendants argue
that their use of Plaintiff’s trademark for this purpose is
“nominative” use and, therefore, permissible.3
In New Kids on the Block v. News Am. Publ’g, Inc., 971 F.2d
302, 308 (9th Cir. 1992), the Ninth Circuit articulated a three
part test for determining when an unauthorized use of an
undisputed trademark is permissible. The court stated
where the defendant uses a trademark to describe theplaintiff’s product, rather than its own, we hold thata commercial user is entitled to a nominative fair usedefense provided he meets the following threerequirements: First, the product or service in questiomust be one not readily identifiable without use of thtrademark; second, only so much of the mark or marksmay be used as is reasonably necessary to identify theproduct or service; and third, the user must do nothinthat would, in conjunction with the mark, suggestsponsorship or endorsement by the trademark holder.
971 F.2d at 308. In a footnote elaborating on this standard fo
“nominative fair use,” the court stated, “Thus, a soft drink
competitor would be entitled to compare its product to Coca-Cola
or Coke, but would not be entitled to use Coca-Cola’s
distinctive lettering.” Id. n.7.
In Playboy Enters., Inc. (PEI) v. Welles, 279 F.3d 796 (9th
Cir. 2002), the court applied the New Kids on the Block three
part test to the request of the plaintiff PEI to enjoin the
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defendant Welles from using PEI’s trademark in the metatags in
Welles’ website. In that case, the court held that Welles could
continue to use Playboy’s trade names in her metatags because
those trademarks actually described the services provided by
Welles. “There is no other way that Ms. Welles can identify or
describe herself and her services . . . .” Welles, 279 F.3d at
802. Although the facts of Welles are inapposite here
(Defendants need not use Plaintiff’s trade name to identify
Defendants’ own products), the Ninth Circuit noted that its
holding was intended to protect those who criticize the holder
of a well-known trademark as well as those, like Welles, whose
notoriety is tied to it. “Similarly, someone searching for
critiques of Playboy on the Internet would have a difficult time
if Internet sites could not list the object of their critique in
their metatags.” Id. at 804.
Plaintiff’s request for an order enjoining Defendants from
using the trade name “J.K. Harris” on their website or in the
HTML code for their website must be evaluated pursuant to the
New Kids on the Block three part test.
In cases in which the defendant raises a nominative usdefense, the above three-factor test should be appliedinstead of the test for likelihood of confusion setforth in Sleekcraft . . . . When a defendant uses atrademark nominally, the trademark will be identical tthe plaintiff’s mark, at least in terms of the words iquestion. Thus, application of the Sleekcraft test,which focuses on the similarity of the mark used by thplaintiff and the defendant, would lead to theincorrect conclusion that virtually all nominative useare confusing.
Welles, 279 F.3d at 801. In this case, unlike Brookfield
Communications, Defendants are using Plaintiff’s mark “to
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4In Brookfield Communications, on the other hand, thedefendant used the plaintiff’s trade name without referring tothe true owner of the mark. 174 F.3d at 1066. The defendant’suse was consequently analyzed pursuant to Sleekcraft and thecourt enjoined the continued use of the plaintiff’s trade name.
5In a later portion of this order, the Court addressesPlaintiff’s allegation that Defendants have published falseinformation about Plaintiff on their website. Here, however,the Court is only addressing Plaintiff’s request to enjoinDefendants from all uses of the name “J.K. Harris” as proscribedby the Lanham Act.
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describe the plaintiff’s products.” New Kids on the Block, 971
F.2d at 308. Thus, if their use satisfies the three prongs of
the New Kids on the Block test, it is permissible.4
Under the three part New Kids on the Block test,
Plaintiff’s request to enjoin all uses of the trade name J.K
Harris by Defendants is overly broad. Defendants’ use of
Plaintiff’s trade name in links to other web pages and when
disseminating truthful factual information is nominative fair
use. New Kids on the Block, 971 F.2d at 307 (competitors may
use a rival's trademark in advertising and other channels of
communication if the use is not false or misleading) (citing
Smith v. Chanel, Inc., 402 F.2d 562 (9th Cir. 1968)).5
In fact, all uses of Plaintiff’s trade name by Defendants
satisfy the first and the third prongs of the nominative use
test. The first prong is met because, like the singing group
New Kids on the Block and the company Playboy Enterprises, the
tax representation service J.K. Harris is simply “not readily
identifiable without use of the mark.” New Kids on the Block,
971 F.2d at 308. The third prong is met because it is clear
from the context of Defendants’ website that Plaintiff has not
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6The Ninth Circuit did not hold that this is the only way tshow that the use of a protected trademark does not meet thesecond prong of the New Kids on the Block test. Rather, atrademark holder may use other evidence to show that a defendanthas used the trademark more than was necessary to identify theproduct.
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sponsored or endorsed the information provided there.
However, the second prong of the New Kids on the Block test
requires that “only so much of the mark or marks be used as is
reasonably necessary to identify the product or services.” 971
F.2d at 308. Some of the computer programming techniques that
Defendants are alleged to be using may not satisfy this
requirement. In Welles, for example, the court noted that its
determination that the nominative use doctrine protected Welles’
use of PEI’s trademark was fact-specific. That “decision might
differ if the metatags listed the trademarked term so repeatedly
that Welles' site would regularly appear above PEI's in searches
for one of the trademarked terms.” 279 F.3d at 804.6
In order reasonably to identify its competitor, J.K.
Harris, Defendants need not use “header Tags” or “underline
Tags” around sentences containing Plaintiff’s trade name.
Defendants also do not need to use Plaintiff’s trade name and
permutations of Plaintiff’s trade name as keywords seventy-five
separate times, or increase the font size and underline the
sentences containing Plaintiff’s trade name, or place sentences
containing Plaintiff’s trade name at the top of Defendants’ web
pages. See Spencer Dec.
¶ 5.
Because some of Defendants’ uses of Plaintiff’s trade name
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7The “hot links” on Defendants’ website connecting users toPlaintiff’s website, two Wall Street Journal articles, aNewswire article, and a St. Petersburg Times article appear toconstitute fair use and are not enjoined.
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demonstrated a likelihood of confusion, it is ordinarily
presumed that the plaintiff will suffer irreparable harm if
injunctive relief is not granted.” Metro Pub., Ltd. v. San Jose
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f) “The [J.K. Harris] co. is fraudulent and a scamand needs to be uncovered. They are worthless.”
g) “The sales force is largely high pressure salesmewhose only job is to get your name on a contractand pick up a check.”
h) “It is highly unlikely that you will speak with alicensed tax pro . . . until long after you havepaid JK Harris.”
i) “I have spoken to hundreds of current and formerJK Harris clients who have never even spoken witha licensed tax pro despite having paid thousandsof dollars.”
j) “John Klintworth Harris was a CPA licensed in botNorth Carolina and South Carolina. After beingfaced with disciplinary proceedings he opted toturn in his licenses to practice in both states,perhaps sensing they would take them away if hedidn’t act first.”
k) “Do you want to work with a company run by a manwho can’t even keep his CPA licenses????”
l) “I have spoken to numerous tax professionals allof whom have said it is extremely rare for any CPto ever turn in his/her license. All stated thatthe only reason a CPA would ever do that is toavoid having the license taken awayinvoluntarily.”
m) “If you are a current client of JK Harris . . .[y]ou are in for a long wait and nothing gettingdone with your case.”
n) “They [J.K. Harris] have to farm out their taxreturns because they don’t have the man power toprocess what they already have.”
o) “There are consultants working for that companyright now that will sell you an [Offer InCompromise] whether you qualify or not.”
Each of these representations may be susceptible to being
found “literally false, either on its face or by necessary
implication, or . . . literally true but likely to mislead or
confuse consumers.” Southland Sod Farms, 108 F.3d at 1139.
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8Statements g), h), i), j), k), and l) above were posted byDefendants. Defendant Kassel cannot have personal knowledge ofthe truth or falsity of statements i) and l) because the truthor falsity of those statements depends on whether the “numerous
(continued...
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Each of these statements, therefore, may be actionable under the
Lanham Act. Plaintiff has submitted a declaration sworn under
penalty of perjury that these statements are, in fact, false.
In response, Defendant Kassel has submitted a declaration
stating that the information “I myself gathered . . . is
publically available and factually correct.” Declaration of
Steven H. Kassel (Kassel Dec.), ¶ 2. As to the remainder of th
information about Plaintiff on Defendants’ website, Kassel
declares only that he is “informed by the persons submitting
this information that it is factually true.” Id.
The Court will not enjoin those statements Defendant Kassel
has declared, based on personal knowledge, to be factually
accurate. Plaintiff cannot show a likelihood of success in
proving that these statements are proscribed by the Lanham Act
because the declarations from the parties are of equal weight
and directly contradictory. Plaintiff has shown a serious
question going to the merits of whether Defendants have violated
section 43 of the Lanham Act by publishing false representations
of fact misleading to the public. However, because enjoining
these statements prior to an adjudication of their truth or
falsity would suppress arguably protected speech, the Court
concludes that the balance of hardships does not tip decidedly
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8(...continued)tax professionals” and “hundreds of current and former JK Harrisclients” with whom Defendant Kassel allegedly spoke weretruthful. Therefore, Defendant Kassel’s declaration issufficient to rebut the alleged falsity of statements g), h),j), and k). Those four statements are not enjoined at thistime.
9Statements a) through f), m), n) and o) were submitted bythird parties. There is no admissible evidence that thesestatements are true. These statements are therefore enjoined.
10Plaintiff’s request for injunctive relief pursuant toCalifornia’s prohibition on false and misleading advertising isduplicative of its request under section 43 of the Lanham Act.Under Cal. Bus. & Prof. Code § 17500, Plaintiff is entitled tothe same relief enjoining specific allegedly false andmisleading statements to which it is entitled under the LanhamAct. Similarly, Plaintiff also alleges that several of thestatements detailed above are defamatory. Plaintiff’s request
(continued...
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Those statements that Plaintiff has declared to be false
that were submitted to Defendants by third parties are enjoined
The only evidence in the record indicates that these statements
are false and misleading and prohibited by the Lanham Act.
These statements, moreover, are harmful to the business
reputation and good will of Plaintiff. Plaintiff has shown both
a serious question as to whether these statements are false and
that the balance of hardships tips in its favor. Because
Defendants have submitted no admissible evidence that these
statements are true or, for some other reason, constitutionally
protected, they suffer no hardship in having these statements
enjoined.
Therefore, Plaintiff is entitled to an injunction
prohibiting the dissemination of all of the statements listed
above with the exception of statements g), h), j) and k).10